Business Finance And Business Loan - Residential Loan Differences

With the increasingly chaotic investment climate for residential financing in the United States, more residential real estate investors are exploring commercial real estate and business finance opportunities. It is important for prospective commercial property owners, business owners and business investors to educate themselves about options for the business loan and commercial mortgage environment they will be facing.

There are numerous significant distinctions between commercial real estate investing and residential real estate investing. Of over 20 major commercial loan differences, several important issues will be covered in this business financing article and other commercial financing elements will be described in additional reports.

Stated Income Business Loan Options

Stated income commercial loan programs will preclude the need for personal tax returns to qualify for a business loan. However the stated income commercial mortgage will not change documentation requirements involving income for the business being purchased. In contrast to residential mortgages, no doc (no documentation) loans are not possible for commercial financing.

Down Payment for Business Opportunity Financing - Business Finance

Down payment requirements for buying a business commonly vary from 10% to 25% or more. The specific amount will depend on business experience of the borrower, requirements for business opportunity business finance, type of business and credit scores.

Commercial Mortgage and Business Opportunity Financing - Size Limitations

A commercial real estate loan less than $100,000 is difficult to arrange. $2 million is the prevailing maximum for a stated income commercial loan. Many other business loan options are restricted to $5 million or less.

Interest Rates for Business Opportunity Financing and Business Loan

Interest rates for a business loan are generally higher than residential financing and rates up to 13% and even higher are possible. It is possible to obtain both fixed and variable commercial mortgage interest rates. Business opportunity financing typically has interest rates 1-3% higher than a comparable commercial real estate loan situation.

Business Finance and SBA Loan - Personal Guarantors

A personal guarantee from all principal owners is usually a standard requirement for business finance situations even when a business is titled under corporate ownership. Because of this, individual credit scores of the business owners will be an important factor to qualify for a business loan. Individuals should expect to personally guarantee a commercial mortgage if they own over 20% of a business.

Appraisals for a Commercial Mortgage or Business Opportunity Financing

It is normal for commercial property and business opportunity appraisals to require over a month to complete. Commercial appraisals are much more complex and expensive than residential appraisals. Business opportunity financing and commercial loan value is traditionally based on business income rather than a comparable property analysis used in residential appraisals.

Other Important Business Loan Differences

There are simply too many important distinctions between commercial mortgage situations and residential mortgages to describe fully in this article. Commercial borrowers interested in a more comprehensive discussion about recall or balloon terms for commercial financing, special purpose commercial property financing, refinancing an SBA loan, buying a business opportunity and how to avoid major business financing problems should see the additional reports we have prepared on this topic.

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